Will the information processing and software development business continue to deliver revenue and profit growth in Q3?

In FY2026-H1, the information processing and software development business posted revenue of ¥9,704 million, up 7.2% year on year, and segment profit of ¥3,119 million, up 12.1%. On a company-wide basis, revenue was ¥10,803 million and operating profit was ¥3,330 million, up 9.6% and 12.3%, respectively, year on year, with the core business driving revenue and profit growth for the company as a whole. In FY2025-H1, the segment posted revenue of ¥9,055 million and segment profit of ¥2,783 million, so profit growth has continued to outpace revenue growth.

The segment profit margin rose by approximately 1.4 percentage points, from approximately 30.7% in FY2025-H1 to approximately 32.1% in FY2026-H1. For the full year, FY2025 revenue was ¥18,703 million and operating profit was ¥5,802 million, up 4.8% and 13.3%, respectively, year on year. Accordingly, in Q3 it will be necessary to confirm not only revenue growth, but also the extent to which the higher mix of systems operations and the profitability of services leveraging existing information system assets contributed to the margin improvement.

In response to loss-making projects in the past, the company has stated that it strictly reviews labor requirements, schedules and difficulty at the time of accepting orders and declines orders when necessary. Provisions for losses on construction contracts increased from ¥111.748 million at the end of FY2024 to ¥190.449 million at the end of FY2025, making it difficult to conclude that development quality risks have disappeared based solely on the recent profit growth. For FY2026-H1, no specific disclosure has been identified regarding the balance of these provisions, any additional provisions, or deterioration in project profitability by project.

In the next earnings release, it will be important to see whether the company discloses a breakdown of systems operations, software development and facilities services in addition to cumulative Q3 segment revenue and profit. Quantitative disclosure of orders received and order backlog has also not been provided in past earnings summaries, leaving insufficient information to directly assess the accumulation of orders. The key indicators to confirm in Q3 will be whether revenue growth of 7.2%, profit growth of 12.1% and a profit margin of approximately 32% can be maintained year on year, while additional provisions for losses on construction contracts remain contained.